Return of income and assessments

I. Sec 139(1) – Due date for filing of Return of Income

1) Every Person being a company or a firm or any other person whose income is assessable to tax
exceeds the minimum amount in the Previous Year before giving the effect of deduction under
Chapter VI A, shall file Return of Income.
2) Any person other than a company or a firm, if his total income is below the basic exemption limit
before claiming exemption under section 10, then such assessee should file the return of income.
Also, if the Capital Gains before claiming exemptions under sections 54, 54B, 54D, 54EC, 54F, 54G,
54GA or 54GB, exceeds the basic exemption limit, shall file the returns mandatorily before the
due date.
3) Any person (other than a company or a firm) who is not required to furnish the return of income
under any provisions of section 139(1), shall be obligated to file the return of income and who
during the previous year –
a. Has deposited a total amount exceeding Rs. 1 Crore in one or more current account(s) in
a bank or co-operative bank; or
b. Has incurred expenditure of an total amount exceeding Rs. 2 Lakhs for himself or any
other person for travel to a foreign country; or
c. Has incurred expenditure of an total amount exceeding Rs. 1 Lakh towards consumption
of electricity;
d. Fulfills such other conditions as may be prescribed.
4) Due Date of Filing of Return of Income is as below –
a. Assessee who is required to furnish Transfer Pricing Report u/s 92E, the due date is 30 th
November of Relevant Assessment Year.
b. Company (other than ‘a’ above), other Person whose accounts required to be audited u/s
44AB and working partner of a firm whose books are required to be audited, the due date
is 31st October of Relevant Assessment Year. However, the audit report has to be furnished
by 30th September of relevant assessment year.
c. For other assesses, the due date of filing of return of Income is 31 st July of Relevant
Assessment Year.
In case of Resident & Ordinarily Resident, who is not required to furnish a return, shall be mandated to
file the return if he has: (i) any asset (including financial interest in any entity) located outside India; or (ii)
signing authority in any account located outside India. Such person shall furnish, on or before the due
date, a return in respect of his income or loss.

II. Filing Returns in Electronic Form [Sec 139(1B)]

1) It is mandatory to file the return of income in electronic form in the following cases:
(a) All Company assessees; (b) Other assessees, who are subjected to audit u/s. 44AB of the Income-
tax Act; (c) Every Individual and Hindu Undivided Family, whose total income exceeds Rs. 10 lakhs
for the relevant previous year.
(b) In respect of cases not covered above, it is optional for an assessee to file return in electronic
form.
III. Loss Returns – Sec 139(3)
Any person who has sustained loss in any previous year and claims that such loss should be carried
forward under Section 72 (Business Loss), Section 73 (Speculation loss), Section 73A (Loss from Specified
Business), Section 74 (Loss under capital gains) or Section 74A (loss from activity of owning and maintain
race horses) shall furnish a return of loss within the time allowed u/s. 139(1). Any return so filed shall be
treated as a return filed u/s 139(1) and all the provisions of the Act shall apply accordingly. Sec, 80 states

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 that unless loss return is filed within the due date stipulated u/s. 139(3) and loss is determined in
pursuance of that return, such loss cannot be carried forward.

IV. Belated Returns – Sec. 139(4)

1) Any person who has not furnished a return: (a) On or before the time allowed u/s. 139(1); or (b)
Within the time allowed by the notice issued u/s. 142(1) can file a belated return.
2) A time limit up to end of the relevant assessment year or before the completion of assessment,
whichever is earlier for filing such belated return.
V. Revised Return – Sec. 139(5)
1) When assessee has furnished a return u/s. 139(1) or return filed u/s 139(4) or in pursuance of any notice
issued u/s 142(1), can file a revised return if assessee discovers any omission or any wrong statement in
the return filed earlier.
2) The time limit for filing revise return is, within end of relevant assessment year or before completion of
assessment, whichever is earlier.
3) A Revised return can be revised any number of times within the time limit allowed u/s 139(5).

VI. Defective Return – Sec 139(9)

1) A Return can be regarded as defective by the Assessing Officer under the following situations:
a. Annexure, statements and columns in the Return have not been filled.
b. A Return of Income is not accompanied with Statement of Computation or Proof of TDS/ TCS
not attached or proof of advanced tax paid not attached etc.,
c. Tax Audit report not attached.
2) The Assessing Officer may intimate such defects to the assessee. Assessee shall rectify such defects
within 15 days of service of notice of defect or within such time limit allowed by the assessing officer.
3) If assessee fails to rectify the defects pointed out by assessing officer within the time prescribed, the
assessing officer shall treat such defective returns as invalid returns and proceed as if the assessee
has failed to file the return.

VII. Permanent Account Number (PAN) Sec 139A – PAN should be quoted in all tax challans, Returns and
correspondence with Income Tax Authorities. Under Rule 114B PAN should be quoted in the following
transactions:
1) Any Contract for Sale or Purchase of Securities of value Exceeding Rs 1 Lakh.
2) For making application for purchase of Mutual Funds for amount of Rs. 50,000 or more.
3) Making an application to Company for acquiring shares for an amount of Rs. 50,000 or more.
4) Making an application to a Company or Institution for acquiring debentures or bonds for an amount
of Rs. 50,000 or more.
5) Sale or Purchase of immoveable Property valued at Rs 5 Lakhs or more.
6) Sale or Purchase of Motor Vehicle defined in sec 2(28) of Motor Vehicles Act 1988. (Other than two
wheeler Motor Vehicle)
7) Payment to a dealer of Bullion or Jewellery of amount of Rs 5 Lakhs or more, whether on onetime
Payment or otherwise.
8) Opening an account with banking company of making a deposit exceeding Rs 50,000 in any account
with post office savings bank account.
9) Time Deposit with a banking company exceeding Rs 50,000 with a banking company. (Minor to quote
his legal guardian’s PAN)
10) Cash Deposits or Payments for purchase of bank drafts or pay orders or bankers cheque from a
banking company for an amount aggregating Rs 50,000 or more during one day.
11) Making an application to any bank for issuing a credit card or debit card.

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 12) Making an application for installation of telephone connection including cellular phone connection.
13) Payments made to hotels and restaurants against bills for an amount exceeding Rs. 25,000 at one
time.
14) Cash Payments exceeding Rs 25,000 in connection with foreign travel.
15) Payment of Insurance Premium aggregating Rs 50,000 or more in a year to any insurer.
16) Any resident person (other than individual), which enters into a financial transaction for an amount
aggregating to Rs. 250,000 or more in a financial year.
17) Any person who intends to enter into such transactions as may be prescribed by the Board in the
interest of revenue (applicable with effect from 01st September 2019).

Note: Every person who is required to quote is PAN and who has not been allotted with PAN or allotment
of PAN is done and has linked such PAN with his Aadhar Number, may quote his Aadhar Number in lieu of
PAN. (applicable with effect from 01st September 2019).

VIII. Return by whom to be verified – Sec 140

SL No Assessee Verified by
1. Individual Himself
When absent from India; mentally His guardian or any other person competent to
incapacitated; for any other reason act on his behalf duly authorized by him.
he is not able to sign.
2. HUF Karta
Where Karta is absent from India or Any other adult member of the family.
is mentally incapacitated.
3. Company Managing Director
Where M.D is unable to sign or Any other director.
where there is no M.D.
When company is not resident in Any person who holds a valid Power of Attorney
India from the company.
When the company is in liquidation The Liquidator
When the company’s management The Principal Officer.
is taken over by the Government.
4. Partnership Firm Managing Partner
Where for any unavoidable reason, Any other partner not being a minor.
managing partner is not able to
sign or there is no managing
partner
5. Limited Liability Partnership Designated Partner
Where for any unavoidable reason, Any other partner.
designated partner is not able to
sign or there is no designated
partner.
6 Local Authority Principal Officer
7. Political Party Chief Executive Officer
8. Association of Person Any member or Principal Officer
9. Any other Person That person or some other person who is
competent to act on his behalf.

IX. Quoting of Aadhar Number – Section 139AA – Every person who is eligible to obtain Aadhar number shall
quote the same in application form for allotment of PAN and in the return of income. However, if the
person does not have Aadhar number then, Aadhar enrolment ID shall be quoted on the same. In case the

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 same is not quoted or not linked with PAN then the PAN allotted shall be invalidated and considered as if
such person does not have PAN. Also, the PAN of such person shall be made inoperative (in the
prescribed manner) (applicable with effect from 01st September 2019).
This provision does not apply for individuals residing in Assam, Jammu and Kashmir and Meghalaya, Non-
residents, Individuals who have attained the age of 80 years or more or an individual who is not a citizen
of India.

Self Assessment Tax – Sec. 140A

On the basis of the return of income that is being filed u/s.139 or in response to notice issued u/s 142(1) for
making inquiry before assessment or in response to notice u/s 148 where income has escaped assessment, or in
response to notice under section 153A for making assessment in case of search or requisition or under any other
provisions of this Act, the assessee is required to compute the tax payable by him after considering the following:

i. Tax already paid under the provisions of the Act;

ii. Amount of tax deducted at source and collected at source;

iii. Relief of tax u/s 89, 90,90A or 91;

iv. Credit on Minimum Alternate Tax (MAT) available in case of companies, u/s 115JAA.

v. Credit on Alternate Minimum Tax (AMT) available in case of person other than companies, u/s. 115JD.

vi. Any tax or interest payable according to section 191(2) ie., taxation on ESOP as perquisite in the hands of
employees of the start-up companies.

If the payment made by the assessee falls short of the aggregate of the tax and interest, the payment made shall
first be adjusted towards the interest payable under sections 234F, 234A, 234B, 234C and the balance amount
shall be adjusted towards the tax payable.

After a regular assessment is made under section 143 or assessment is made u/s 144 or u/s 153A or any other
relevant provisions of the Act, any amount paid under this section shall be deemed to have been paid towards
such assessment.

Inquiry before assessment – Sec. 142

Notice

1) To make an assessment, the Assessing Officer may serve a notice on any person who has filed a return u/s.139
or in the case of any other person where the due date for filing return of income has expired requiring the
following:

i) If the assessee has not filed a return within the time allowed u/s. 139(1) or before the end of the
assessment year, then the notice can require him to furnish the return of income. [Sec 142(1)(i)]

ii) The notice can require the production of accounts and documents. [Sec 142(1)(ii)]

iii) The notice can require furnishing of information on such points or such matters including the
furnishing of the list of assets and liabilities as the Assessing Officer may require. [Sec 142(1)(iii)]

2) But, prior approval of Joint Commissioner is necessary before requiring the assessee to furnish the details of all
assets and liabilities not included in the accounts. The assessing Officer shall not require the production of
accounts relating to a period more than 3 years prior to the previous year - Proviso to Sec. 142(1).

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Enquiry

The Assessing Officer may make such inquiry as he considers necessary for the purpose of obtaining full
information about the income or loss of any person - Sec. 142(2).

Special audit – Section 142(2A)

1) The Assessing Officer at any stage of the proceedings may, having regard to the nature and complexity of the
accounts of the assessee and the interest of the revenue, direct the assessee to get the accounts audited and
furnish the audit report. Such a direction can be issued only with the prior approval of the Principal Chief
Commissioner or Chief Commissioner or Commissioner and the audit shall be done by a Chartered Accountant
nominated by the Chief Commissioner or Commissioner – Sec. 142(2A)

2) The Assessing Officer shall not direct the assessee to get the books of accounts audited unless the assessee has
been given a reasonable opportunity of being heard.

3) The audit may be directed even if the accounts are already audited. The audit report shall be furnished (in
Form 6B) within a period specified by the Assessing Officer which can be extended up to 180 days from the date
of receipt of direction by the assessee. The date of furnishing of audit report may be extended either by the
Assessing Officer himself or on an application made by the assessee.

4) The expenses for the audit shall be determined by the Principal Chief Commissioner or Chief Commissioner or
Principal Commissioner or Commissioner, in accordance with the prescribed guidelines and such fee shall be paid
by the Central Government.

Opportunity

The assessee shall be given an opportunity of being heard in respect of materials gathered on inquiry u/s 142(2)
or audit u/s 142(2A) and proposed to be used in the assessment - Sec.142(3). However, no opportunity be given
where assessment is made u/s 144. However, the direction to special audit cannot be issued after completion of
assessment. Also, no appeal can be preferred against order u/s 142(2A) directing special audit.

Faceless Enquiry and Valuation – Sec 142B

1. The Central Government may by notification in Official Gazette, may make a scheme for the purpose of:

a. Issuing notice u/s 142(1); or

b. Making enquiry to obtain full information in respect of the income or loss of any person u/s 142(2);or
c. Directing the assesse to get the accounts audited by an accountant u/s 142(2A);or
d. Making a reference to valuation officer to estimate the value of any asset, property or investment u/s
142A.
The objective of the scheme is to impart greater efficiency, transparency and accountability by:

a. Eliminating the interface between the income tax authority or valuation officer and the assesse or any person to
the extent technologically feasible;

b. Optimizing, utilization of the resources through economies of scale and functional specilisation;

c. introducing a team based issuance of notice or making of enquiries or issuance of directions or valuation with
dynamic function [Sec 142B(2)].

2. The Central Government may, for the purpose of giving effect to the scheme made u/s 142B(1), by notification
in official Gazette, direct that any of the provisions of this Act shall not apply or shall apply with such exceptions,

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modifications and adaptions as may be specified in the notification. No such direction shall be issued after 31-03-
2022 [Sec 142B(2)].

3. Every such notification issued by the Central Government as above, has to be laid before each house of
Parliament as soon as possible [Sec 142B(3)].

Assessment – Sec 143

The return of income filed u/s. 139 or in response to notice u/s. 142(1) shall be processed in the following
manner:-

a) The total income or loss shall be computed after making the following adjustments, namely

a. Any arithmetical errors in the return; or

b. Any incorrect claim which is apparent from any information in the return.

c. disallowance of loss claimed, if return of the previous year for which set off of loss is claimed is
furnished beyond due date specified u/s 139(1).

d. disallowance of expenditure indicated in the audit report but not taken into account in computing the
total income in the return

e. disallowance of deduction claimed u/s 10AA and income based deduction under chapter VIA (section
80IA to 80IE), if return is furnished beyond the due date specified u/s 139(1).

An incorrect claim apparent from any information in the return shall mean he following claims, on the basis of an
entry in the return,

i) Of an item which is inconsistent with another entry of the same or some other item in the return of
income;

ii) In respect of which the information required to be furnished under the Act to substantiate the entry
has not been furnished;

iii) In respect of deduction, where such deduction exceeds specified statutory limit expressed as monetary
amount or percentage or ratio or fraction.

b) The tax and interest, if any, shall be computed on the basis of the total income computed after considering the
adjustments mentioned above;

c) The tax payable by or refund due to the assessee shall be determined after giving credit to Tax Deducted at
Source, Tax Collected at Source, Advance tax paid, relief allowable u/s 89 or under Double Taxation Avoidance
Agreement or u/s 90, 90A and 91, self-assessment tax paid or any other amount paid otherwise than by way of
tax or interest paid;

d) Intimation is required to be sent in a case where there is demand payable by the assessee or where refund is
due to the assessee. Again, intimation shall be sent when the loss declared by the assessee is adjusted but no tax
or interest is payable or no refund is due. In all other cases, acknowledgement issued on filing of the return of
income shall be deemed to be intimation; [Sec 143(1)].

e) Intimation shall be sent within one year from the end of the financial year in which the return is made;

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f) Processing of a return u/s. 143(1) shall not be necessary where a notice has been issued to the assessee u/s.
143(2) taking up the case for regular assessment – Sec. 143(1D).

Centralised processing of returns – Sec 143 (1A)

For the purpose of processing the returns, the Board is empowered to make a scheme for centralized processing
of returns with a view to expeditiously determine the tax payable or refund due to the assessee.

Regular / Scrutiny assessment – Sec 143 (2) & 143 (3)

1) The Assessing Officer or the prescribed Income Tax authority shall, if he considers it necessary or expedient to
ensure that the assessee –

a) has not understated the income; or

b) has not computed excessive loss; or
c) has not underpaid the tax in any manner,

may take up the case for regular assessment by serving a notice u/s 143(2), specifying the date on which he
should either attend or produce the evidence relied by assessee.

Note: Prescribed authority means the authorities covered u/s 116, not below the rank of Income Tax officer.

2) Such notice shall be served on the assessee within 6 months from the end of the financial year in which the
return is furnished.

3) The assessing Officer, after hearing evidence produced by the assessee and taking into account all relevant
material which he has gathered, shall make an assessment u/s 143(3)(ii) of the total income or loss of the
assessee by an order in writing and determine the sum payable by him or the amount refundable to him on the
basis of such assessment.

4) Where a regular assessment is made under section 143(3) or section 144, any tax or interest paid u/s.143 (1)
shall be deemed to have been paid towards such regular assessment. If no refund is due on regular assessment or
if the amount refunded u/s.143 (1) exceeds the amount refundable on regular assessment, the whole or the
excess amount so refunded shall be deemed to be tax payable by the assessee – Sec.143(4).

5) While carrying out regular assessment u/s.143 (3):

a) In the case of research association, news agency, institution, fund or trust, etc., the Assessing Officer shall give
effect to the concerned sub-clause of section 10 under which such assessee have been granted exemption.
However, the Assessing Officer can proceed to pass an assessment order without granting exemption u/s. 10 in
the following circumstances:

(i) Where the Assessing Officer has found during the course of assessment that such assessee is carrying on its
activity in contravention of the relevant sub clauses of section 10, under which they are approved for exemption
and the same has been intimated to the Central Government or the prescribed authority; and

(ii) The approval granted to such assessee has been withdrawn or exemption notification issued has been
rescinded.

b) In the case of any University, College or other institutions approved u/s 35, the Assessing Officer, should satisfy
himself that the activities of these institutions are being carried out in accordance with the guidelines and
conditions subject to which the approval was granted. In case it is found that, there is a violation, the Assessing
Officer may recommend to the Central Government to withdraw the approval after giving the assessee a

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reasonable opportunity of showing cause against the proposed withdrawal. The Government may withdraw
approval and forward a copy of the order to the assessee and Assessing Officer – second proviso to Sec. 143 (3).

c) In the case of a trust or institution, which carries on activities in the nature of general public utility and its gross
receipts from commercial activity exceeds Rs.25 lakhs in the previous year, Assessing Officer shall not give the
benefit of exemption u/s. 10(23C) irrespective of the approval granted being withdrawn or not – Third proviso to
Sec. 143(3).

Best judgment assessment – Sec. 144

If any person fails to furnish return of income or fails to respond or comply with notices issued, the Assessing
Officer, after taking into account all relevant material which he has gathered and giving the assessee an
opportunity of being heard shall make the assessment of the total income or loss to the best of his judgment and
determine the sum payable by the assessee under the following circumstances:

Failure on the part of assessee Relevant section Opportunity to be

heard
1. Failure to make the return or belated 139(1),(4) & (5) To be given
return or revised return

2. Failure to comply with all the terms of a notice issued

requiring the assessee to –
a) file a return or produce accounts etc. or furnish 142(1) Need not be given
information called for (since notice was
already issued)
b) get the accounts audited and furnish the audit report
142(2A) To be given
c) ensure his attendance or produce evidence supporting the
return filed
3. Where the income is not computed in accordance with the 143(2) To be given
notified ‘Income Computation and Disclosure Standards’
145(3) To be given

The provisions of Sec.144 are mandatory in nature. Even if there is one of the 4 defaults mentioned above on the
part of the assessee, the officer is bound to make assessment to the best of his judgment. The default committed
by the assessee should be indicated in the record. Opportunity to be heard given to the assessee must be real and
effective. Proper and valid service of notice should be proved by the department.

Protective Assessment

Under the Income-tax Act, the income of a person can be assessed only in the hands of such person unless there
is a specific provision by which it requires to be assessed in the hands of another person (e.g. Clubbing
provisions). However, when the ownership of the income is in dispute or is a matter of doubt, it is open to the
Assessing Officer to assess a particular income in the case of the person who is considered as liable to tax and
include the same income in the case of another person also, as a protective measure. Such an assessment is
known as Protective Assessment.

For example, Mrs. A files her return of income showing a business income of Rs. 2 crore. However, if the Assessing
Officer is of the view that the said income belongs to her husband, Mr. A, the Assessing Officer shall assess the
sum of Rs. 2 crore in the case of Mr. A and shall proceed to assess the same amount in the case of Mrs. A on the
protective basis.

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Income escaping assessment

Sec.147 Sec.148 Sec.149 Sec.151

(1) Assessment Time limit for issue of Sanction required for
(2)Reassessment Notice to be Issued notice issuing notice
(3)Re-computation

Assessment, re-assessment and re-computation – Sec.147

Basis of Income escaping assessment

If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any
assessment year he may assess or reassess such income or re-compute the loss or depreciation allowance or any
other allowance for that assessment year.

Scope

(1) Once the assessment has been re-opened, any other income which has escaped assessment and which comes
to the knowledge of the Assessing Officer subsequently in the course of the proceeding u/s 147, can also be
included in the assessment.

(2) The Assessing Officer may assess or reassess such income which is chargeable to tax and escaped assessment
other than the income involving matters which are subject matter of any appeal or revision.

Circumstances when income can be said to escape assessment

In the following cases, it shall be deemed that income chargeable to tax has escaped assessment –

a. Where no return of income has been furnished by an assessee although his total income or total income of any
other person in respect of which he is assessable, is above the maximum amount not chargeable to tax.

b. Where a return of income has been furnished but no assessment has been made it is found that assessee has
understated his income or claimed excessive loss, deduction, allowance or relief in the return.

ba. Where the assessee has failed to furnish a report in respect of any international transaction which is required
u/s. 92E.

c. Where an assessment has been made but –

a) Income chargeable tot tax has been under assessed; or

b) Such income has been assessed at too low a rate; or
c) Excessive relief was given in respect of such income; or
d) Excessive loss/depreciation allowance or any other allowance under this Act has been computed.
d. Where a person is found to have any asset or interest (including any financial interest in any entity) located
outside India.

e. On the basis of information or any document received from the Income tax authority by Assessing Officer u/s
133C(2), that the income of the assessee has exceeded the basic exemption limit and he has not furnished the
return of income for the relevant Assessment Year or has understated his income or has claimed excessive loss,
deduction, allowance or relief in return furnished (from 01/06/2016).

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Issue of notice where income has escaped assessment – Sec.148

1. The Assessing Officer shall, before making an assessment, reassessment or re-computation u/s.147, serve on
the assessee a notice u/s.148 requiring him to file a return of his income or of any other person in respect of
which he is assessable.

2. Before issuing any such notice, the Assessing Officer shall record his reasons for doing so.

3. The return of income is required to be furnished within the time prescribed in the notice by the Assessing
Officer.

Time limit for issue of notice u/s.148 – Sec.149 and Approval for such issue of notice – Sec.151

The time limits for issuing notice u/s.148 are prescribed u/s.149 and the approvals subject to which an Assessing
Officer can issue such notice are stipulated u/s.151. These provisions are summarized and presented as follows:

Particulars Up to 4 years from end Beyond 4 years but up Beyond 4 years but up
of relevant AY to 6 years from the end to 16 years from the
of relevant AY end of relevant AY
Whether assessment For any amount of Any income chargeable Income relating to any
u/s 143(3) or u/s 147 is income escaping to tax which has asset including financial
completed or not assessment escaped assessment interest in any entity
amounts to or likely located outside India
amounts to Rs. 1 lakh or which is taxable and has
more. escaped assessment
Sanctioning authority Assessing Officer below Principal Chief Commissioner or Chief
for issuance of notice the rank of Joint Commissioner or Principal commissioner or
u/s 148 (Section 151) Commissioner requires Commissioner.
prior approval of Joint
Commissioner.
Note: Where an assessment is completed u/s 143(3) or 147, re-opening of a case after the expiry of 4 years from
the end of relevant AY can be made only if, any income chargeable to tax has escaped assessment for such AY by
reason of failure on the part of assessee, to file return u/s 139(1) or to furnish a return in response to notice u/s
142(1) or 148 or to disclose fully and truly all material facts necessary.

Faceless Assessment of Income escaping assessment – Sec 151A

1. Faceless Assessment Scheme for Income escaping assessment may be notified by the Central Government, for
the purposes of assessment, reassessment or re-computation u/s 147 or issuance of notice u/s 148 or sanction for
issue of such notice u/s 151, so as to impart greater efficiency, transparency and accountability by -

a. Eliminating the interface between the income tax authority and the assesse or any other person to the
extent technologically feasible;

b. Optimising utilization of the resources through economics of scale and functional specialization;

c. Introducing a team based assessment, reassessment, re-computation or issuance or sanction of notice

with dynamic jurisdiction – Sec 151A(1).

2. The Central Government may to give effect to the scheme, direct by a notification that any of the provisions of
the Income tax Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be
prescribed in the notification. However, no direction shall be issued after 31 st March 2022. – Sec 151A(2).

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3. Every notification issued has to be laid before each house of Parliament, as soon as may be after the issue – Sec
151A(3).

Time limits and other provisions

Time limit for completion of assessments & reassessments – Sec. 153

153(1) Passing assessment order u/s.143 or Within 21 Months from the end of assessment year in which
144 income was first assessable (applicable for AY 2017-18 or
earlier AY’s). For AY 2018-19, within 18 months from the end
of AY in which the income was first assessable. For AY 2019-20
and subsequent AYs, within 12 months from the end of AY in
which the income was first assessable.
153(2) Making assessment / reassessment Within 9 Months from end of financial year in which notice
etc. u/s.147 u/s.148 is served (applicable for notice u/s 148 served on or
before 31/03/2019). For notice served on or after 01/04/2019,
within 12 months from the end of FY in which notice u/s 148 is
served.
153 (3) Making an order of fresh Within 9 Months (for orders received or passed on or before
assessment in pursuance of the 31-03-2019) and within 12 months (for orders passed or
order u/s 254, 263 or 264 setting received on or after 01-04-2019) from the end of financial
aside or cancelling the assessment year in which order u/s 254 is received by Principal Chief
Commissioner or Chief Commissioner or Principal
Commissioner or commissioner or
Order u/s 263 or 264 is passed by Principal Commissioner or
Commissioner.
Note: Where it is not possible for Assessing Officer to pass order within the time limit as specified above, the
Principal Commissioner or Commissioner if satisfied on the receipt of request in writing by the AO may allow
additional period of 6 months to give effect to the order.

Where the assessment involves reference to Transfer Pricing Officer u/s 92CA (1) the following time limits shall
apply:

153(1) Passing assessment order Within 33 months (for AY 2017-18 or earlier AYs), 30 months (for AY
u/s.143 or 144 2018-19) and 24 months (for AY 2019-20 and subsequent AYs) from end
of assessment year in which income was first assessable.
153(2) Making assessment / Within 21 Months (for notice served on or before 31-03-2019) and 24
reassessment etc. u/s.147 months (for notice served on or after 01-04-2019) from end of financial
year in which notice u/s.148 is served
153(3) Making assessment in Within 21 Months from end of a financial year in which order u/s. 254 is
pursuance of order u/s.250, received by Principal Chief Commissioner or Chief Commissioner or
254, 263 or 264 setting aside Principal Commissioner or Commissioner or
or cancelling assessment
Order u/s.263, 264 is passed by the Principal Commissioner or
Commissioner.
The time limits prescribed u/s 153(1) and 153(2) will not apply in the following cases – Sec 153(6)

153 (6) (i) where the assessment, reassessment, re-computation is
made in consequence of or to give effect to any finding /
direction contained in order u/s 250,254, 260, 262, 263,
264 or an order of any court in a proceeding not by way
of appeal or reference under the act.
153(6) (ii) Assessment made on partner of a firm in consequence of
an assessment made on firm u/s 147.
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Within 12 Months from the end of
the month in which such order was
received or passed by Principal
Commissioner or Commissioner
Within 12 Months from the end of
the month in which the assessment
order in a case firm is passed.
Special procedure in assessment of search cases

Assessment in case of search or requisition – Sec.153A

(1) Once a search is initiated u/s.132 in the case of any person or requisition is made u/s.132A, the Assessing
Officer shall proceed to assess the income in the case of such person in accordance with the provisions of this
section.

(2) The Assessing Officer shall serve a notice to the person concerned requiring him to furnish a return of income
in respect of each of the assessment years falling within six assessment years immediately preceding the
assessment year relevant to the previous year in which such search is conducted or requisition is made.

(3) The assessee shall furnish return of income in response to the above notice within the time period specified in
the notice. The provisions of the Act shall apply as if the return was required to be furnished u/s 139.

(4) The Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within
such 6 assessment years.

(5) Any assessment or reassessment relating to any assessment year falling within the period of 6 assessment
years pending on the date of initiation of the search u/s.132 or making of requisition u/s.132A shall abate. If the
search assessment order is annulled in appeal or any other proceedings, the abated proceedings shall stand
revived with effect from the date of receipt of order of annulment is set aside, the revived proceedings shall cease
to have effect.

(6) The income determined under this section shall be taxed as per the rates of tax applicable for each of the
relevant assessment years.

Time limit for completion of assessment u/s.153A – Sec.153B

1) The time available for completion of assessment or reassessment in respect of each assessment year falling
within 6 assessment years referred above shall be 21 Months from the end of the financial year in which the last
of the authorizations for search u/s.132 or for requisition u/s.132A was executed (for FY 2017-18 and before). For
FY 2018-19, the time limit to complete assessment shall be 18 months from the end of financial year. However,
from FY 2019-20 onwards, the time limit shall be 12 months from the end of such financial year.

2) Where during the course of assessment proceedings, a reference to the Transfer pricing officer is made u/s.
92CA, the time available for completion of assessment or reassessment shall be further extend by period of 12
months in addition to the above time limit specified.

3) In the case of annulled search assessment, the time limit for completion of revived assessments shall be one
year from the end of the month in which the abated assessment revives or within the time limit specified in
Sec.153 or sec.153B whichever is later.

4) In computing the period of limitation as above and in the case of assessment u/s.153C the following shall be
excluded:

i) Period during which stay or injunction is granted by any Court;

ii) Period allowed for special audit u/s.142(2A) to be carried out and for furnishing of the said audit report;

iii) Time taken for reopening any proceeding or for opportunity given to assessee u/s.129;

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iv) In case the assessee files application before the Settlement Commission and the admission of such application
has been levied by the commission, the period from date of filing to the date of rejection by the Settlement
Commission.

v) In case the assessee approaches the Authority for Advance Rulings, the period from the date of filing of
application to the date of rejection of the application or pronouncing the advance ruling as the case may be.

vi) In case annulment of search assessment order is set aside, the period commencing from the date of
annulment till the date of receipt of the order setting aside such order of annulment.

vii) The period commencing from the date of reference for exchange of information under the agreement u/s 90
or 90A and ending with date on which the information requested is received by the commissioner or a period of 1
year, whichever is less.

5) If after extending this time, the period available to the assessing officer for making an order is less than 60 days,
then the remaining period shall be extended to 60 days.

6) For this purpose, the authorization for search shall be construed to have been executed only on the conclusion
of the search as recorded in the last panchanama drawn. In the case of requisition u/s.132A the authorization for
requisition shall be construed as executed only on the actual receipt of the books of account or other documents
or assets by the authorized officer.

Assessment of income of any other person – Sec.153C

Where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or
books of account or documents seized or requisitioned belongs to any other person other than a person in whose
case search was made u/s.132 or requisition was made u/s.132A, then the seized or requisitioned records and
assets shall be handed over to the Assessing Officer having jurisdiction over such other person. Thereafter, such
Assessing Officer shall proceed to issue notice to such other person and assess or reassess his income in
accordance with the provisions of sec.153A for a period of six years preceding the previous year in which search
or requisition took place.

Time limit for Completion of assessment u/s 153C – Sec 153B

1. The assessment for the 6 years period and the year of search shall be completed within 21 Months from
the end of Financial Year in which the last authorization for search u/s 132 or for requisition u/s 132A was
executed (for FY 2017-18 and before). For FY 2018-19, the time limit to complete assessment shall be 18 months
from the end of financial year. However, from FY 2019-20 onwards, the time limit shall be 12 months from the
end of such financial year or within 9 Months from the end of financial year in which the books of account or
documents or assets are handed over to the AO having the jurisdiction over such person, whichever is later.

2. If reference is made to Transfer Pricing Officer u/s 92CA in the course of assessment u/s 153C, the time
limit to complete the assessment is within 33 Months from the end of financial year in which the last
authorization for search u/s 132 or requisition u/s 132A was executed or within 21 Months from the end of
financial year in which books of account or documents or assets seized or requisitioned are handed over to the
Jurisdictional AO of such person, whichever is later.

Common Points for Sec 153A and Sec 153C

1. The Central Government is empowered to make rules specifying the class or classes of cases in which the
Assessing Officer shall not be required to issue notice for assessing or re-assessing the total income for those six

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assessment years. However Central Government cannot specify such relaxation in cases where any assessment or
re-assessment has abated.

2. In this regard, Rule 112F prescribes the following classes of persons:

(i) where, as a result of a search u/s 132(1) or a requisition made u/s 132A, a person is found to be in possession
of any money, bullion, jewellery or other valuable articles or things, whether or not he is the actual owner of such
money, bullion, jewellery etc.; and

(ii) where, such search is conducted or such requisition is made in the territorial area of an assembly or
parliamentary constituency in respect of which a notification has been issued under section 30 read with section
56 of the Representation of the People Act, 1951, or where the assets so seized or requisitioned are connected in
any manner to the ongoing election in an assembly or parliamentary constituency.

This rule shall not apply in a case where the search is conducted after the hours of the poll or where the
assessment proceeding itself is abated under Sec.153A or Sec.153C.

Prior approval for assessment in search cases – Sec 153D

No order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint
Commissioner in respect of each assessment year, except with the prior approval of the Joint Commissioner.

Rectification of mistake apparent on the record – Sec.154

1. Any mistake apparent from the record can be rectified by an Income-tax authority by:

a) Amending any order passed by such authority under the Income-tax Act;

b) Amending any intimation or deemed intimation u/s. 143(1);

c) Amending any intimation u/s 200A(1).

2. Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to
an order, the authority passing such order may amend the order in relation to any matter other than the matter
which has been so considered and decided.

3. The mistake apparent on record can be rectified by an Income-tax authority either on its own motion or on an
application by an assessee or deductor to that effect. Where the authority is Commissioner (Appeals), rectification
can be done if any mistake has been brought to his notice by the assessee or by the Assessing Officer.

4. The amendment of an order, which has the effect of enhancing an assessment or reducing the refund or
otherwise increasing the liability of the assessee or deductor, shall not be made without giving reasonable
opportunity to the assessee of being heard. Amendment shall be made by way of an order in writing. Where such
amendment gives rise to a demand, the Assessing Officer shall serve a notice of demand on the assessee or
deductor and it shall be deemed to be issued u/s 156.

5. On the other end, where any such amendment has the effect of reducing the assessment or otherwise
reducing the tax liability, the Assessing Officer shall make refund which may be due to the assessee or deductor. –
Sec.154(5)

6. In a case where an assessee or deductor makes an application for rectification u/s.154, then the Income-tax
Authority to whom such application is made shall pass an order within a period of 6 months from the end of the
month in which the application is received from the assessee or deductor making the amendment or refusing to
allow the claim.
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7. The order making the amendment, shall be in writing and it should be made within a period of 4 years from the
end of the financial year in which the order sought to be amended was passed.

Revision by the Principal Commissioner or Commissioner of Income-tax – Sec.263 & 264

Revision of orders prejudicial to the Interest of Revenue – Sec.263

i) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding
under this Act and if he considers that any order passed therein by the Assessing Officer is erroneous in
so far as it is prejudicial to the interests of revenue, pass such order enhancing or modifying the
assessment or cancelling the assessment and directing a fresh assessment.

ii) Such order can be passed only after giving the assessee an opportunity of being heard. For this purpose
the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner
may make or cause to be made such enquiry as he deems necessary.

iii) ‘Record’ shall indicate and shall be deemed always to have included, all records relating to any
proceeding available at the time of examination of the file by the Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner of Income-tax.

iv) Where any order passed by the Assessing Officer had been the subject matter of any appeal, the
powers of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner shall
extend and shall be deemed always to have extended to such matters as had not been considered and
decided in such appeal.

v) No order shall be made after the expiry of 2 years from the end of the financial year in which the order
sought to be revised was passed. In computing the period of two years limit the time taken in giving an
opportunity to the assessee to be reheard u/s.129 and any period during which revision proceeding is
stayed by Court shall be excluded.

vi) An order in revision may be passed at any time in the case of an order which has been passed in
consequence of or to give effect to any finding or direction contained in an order of the Appellate
Tribunal, the High Court or the Supreme Court.

Order deemed to be erroneous – An order passed by Assessing Officer shall be deemed to be erroneous
in so far as it is prejudicial to the interests of the revenue, if in the opinion of Principal Chief
Commissioner or Chief Commissioner or Principal Commissioner or Commissioner of Income tax –

(i) The order passed without making inquiries or verification which should have been made.
(ii) The order passed is allowing any relief without inquiring into the claim
(iii) The order has not been made in accordance with any order, direction or instruction issued by
the broad u/s 119.
(iv) The order has not been passed in accordance with any decision which is prejudicial to the
assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the
assessee or any other person.

Revision of orders granting relief to the assessee – Sec.264

i) In the case of any order other than an order referred to in sec.263 passed by a subordinate authority, the
Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may,
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 either on his own motion or on an application by the assessee for the revision, call for the record of any
proceedings under the Income-tax Act in which any such order has been passed and may pass such order
thereon as he deems fit.

ii) An order prejudicial to the interest of the assessee cannot be passed under this provision. However,
Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner
declining to interfere will not amount to passing of an order prejudicial to the assessee.

iii) The Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or

Commissioner shall, on his own motion revise any order within one year from the date of passing the
order that is sought to be revised.

iv) Application for revision by the assessee must be made within one year from the date on which the
order was communicated to him or the date on which he otherwise came to know of it, whichever is
earlier. However, Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or
Commissioner has the power to condone the delay if he is satisfied that the assesse was prevented by
sufficient cause from making the application within the specified time.

v) Every application for revision should be accompanied by a fee of Rs. 500.

vi) On every application by an assessee for revision, an order shall be passed within one year from the
end of the financial year in which such application is made by the assessee for revision. In computing this
time limit, the time lost u/s.129 or due to stay order by Court shall be excluded. Besides, there is no limit
for the Commissioner to pass an order of revision in consequence of or to give effect to any finding or
direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court.

vii) The Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or

Commissioner has the power to condone the delay if he is satisfied that the assessee was prevented by
sufficient cause from making the application within the specified time.

viii) The commissioner shall not revise any order u/s. 264 in the following cases –

a) Where appeal is not filed with CIT(A) or ITAT and the time limit for filing the appeal has not
expired or in case of an appeal to the Commissioner (Appeals) or Appellate Tribunal the assessee
has not waived his right of appeal; or

b) Where order is subject of an appeal to CIT(A) or Appellate Tribunal.

Comparative Analysis

A comparative analysis of the above provisions relating to powers of revision of the Commissioner of
Income-tax brings out the following distinctive points:

Section 263 Section 264

I. Scope
1) Revision of order erroneous and prejudicial to the Revision of other orders by any sub-ordinate authority.
interest of revenue passed by the Assessing Officer

Two circumstances must exist to enable the The Commissioner shall not revise any order where the
2) Commissioner to exercise the power of revision appeal against the order is pending before the first or
second appellate authorities (or) where the time for filing
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 viz. (i) the order should be erroneous; and (ii) by the appeal has not lapsed and the assessee has not waived
virtue of the order being erroneous prejudice must his right of appeal.
have been caused to the interest of the Revenue.

II.Procedure CIT, either on his own motion or on an application by the

CIT may call for and examine the records and assessee, can call for the records and revise the order.
revise the orders after hearing the assessee.
3) Every application for revision should be accompanied by
Record shall include all records relating to any fees of Rs. 500.
proceeding available at the time of examination of
the file by the Commissioner of Income-tax.
4)
III. Nature of Order An order which is not prejudicial to the interest of the
An order enhancing, modifying or cancelling the assessee can be passed. Commissioner declining to
assessment and directing a fresh assessment can be interfere will not amount to passing of an order
passed by the Commissioner. prejudicial to the assessee.
5)
Where depreciation was not claimed before the
The CIT has jurisdiction and powers to initiate Assessing Officer/ the CIT (Appeal) but was claimed for
proceedings in respect of issues not touched by the the first time before the CIT in an application u/s.264, the
CIT (Appeals) in his Appellate Order CIT must allow the claim on merits.

6) a) Commissioner cannot revise any order beyond 1 year

IV. Time limit
No order can be passed after the expiry of 2 years
from the end of the financial year in which the
order to be revised was passed.
7)
An order in revision may be passed at any time in
the case of an order which has been passed in
consequence of or to give effect to any finding or
direction contained in an order of the Appellate
Tribunal, the High Court or the Supreme Court.
period;
b) Assessee cannot file an application after expiry of 1
year from the date of service of the order. Condonation
of delay is possible if sufficient cause is shown.
Commissioner should pass an order disposing of the
revision petition within one year from the end of the
financial year in which the revision petition was filed by
the assessee.
An order in revision may be passed at any time in the
case of an order which has been passed in consequence
of or to give effect to any finding or direction contained
in an order of the Appellate Tribunal, the High Court or
the Supreme Court.

8)
V. Remedy There is no right of appeal.
Appeal can be filed to the Appellate Tribunal.

APPEALS AND REVISIONS

Appellate hierarchy and Jurisdiction

i) The appeal against the order of the Assessing Officer lies with the Commissioner (Appeals) -
[Sec.246A to Sec.251].

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ii) Appeal against the order of the Commissioner (Appeals) can be preferred by either party viz., the
assessee or the Income-tax Department and such appeal lies with the Appellate Tribunal which is the final
fact finding authority – [Sec.252 to Sec.255].

iii) Appeal against the order of the Appellate Tribunal can be preferred by either party to the High Court
on a substantial question of law – [Sec.260A & Sec.260B].

iv) Appeal can be preferred against the order of the High Court by either party to the Supreme Court
which is the apex court in India – [Sec.261 & Sec.262].

Flow chart on Appellate mechanism

The scheme of appeal procedure and relevant aspects can be easily understood by the students from the
following flow chart:

Appealable order (cause of action)

First appeal u/s.246A within 30 days of Order of AO

Commissioner (Appeals)

Second appeal u/s.253 within 60 days of order of CIT(A)

Income-tax Appellate Authority

[Final fact finding authority]

Third appeal u/s.260A within 120 days of order of ITAT

High Court
[only if substantial question of Law is involved]

Final appeal u/s.261 within 90 days of order of HC

Supreme Court

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 Settlement of Cases

Jurisdiction and powers of Settlement Commission u /s 245BA

1. Each bench of settlement commission shall have the same jurisdiction, powers and authority as of the
commission itself.
2. The bench which the chairman is presiding officer shall be the principal bench and the other benches shall
be known as additional bench.
3. Generally, there are 3 members of a bench of Chairman / Vice-Chairman (presiding officer) and 2 other
members. However, when one of the members constituting a Bench is unable to discharge his function on
account of illness etc., either in the office of presiding officer or members of the bench, then the remaining two
members may function as bench.
4. However, if at any stage of the hearing of any such case or matter, it appears to the presiding officer that
the case or matter is of such a nature that it ought to be heard by a bench consisting of 3 members, then such
matter may be referred by presiding officer of such bench to the chairman for transfer to such bench as the
commission may think fit.
5. To dispose any case, the chairman may constitute a special bench of more than 3 members.
6. In case there is difference of opinion on any point amongst the members, then the same shall be decided
by majority. However if the difference of opinion is equal then the matter shall be referred to the chairman, who
shall either hear himself or refer to one or more members and the matter shall be decided according to the
majority.

Note: Where a member of CBDT is appointed in any capacity into the Settlement Commission then such member
shall cease to be the member of CBDT.

Application for Settlement – Section 245A

An assessee may make an application to settlement commission at any stage of a case. Case means any
proceedings for assessment under this Act of any person in respect of any assessment year(s) which may be
pending before an Assessing Officer on the date on which an application for settlement is made. A settlement
application can be filed only in the following eligible cases:

1. Where proceedings u/s 147 is initiated by issue of notice u/s 148 is pending and any assessment year for
which notice u/s 148 could have been issued on such date.

2. Where assessment proceedings is initiated u/s 254 (rectification of mistake apparent by tribunal) or u/s
263 or 264.

3. In search and seizure related cases covered by issue of notice u/s 153A or 153C.

4. Where regular assessment proceedings is pending.

Note: Any Appellate proceedings and rectification proceedings u/s 154 are not eligible to approach settlement
commission.

Maintainability of an application before the settlement commission – Section 245C

1. There should be a valid proceedings pending and the assessee is required to make an application
containing full and true disclosure of his income which has not been earlier disclosed to the Assessing officer.

2. The additional amount of income tax payable due to additional income offered before the settlement
commission is as under:

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 Provisio to Proceedings u/s Additional
Section amount of
245C Income Tax
exceed
(i) 153A or 153C (Specified person) Rs. 50,00,000
(ia) 153A or 153C (Related cases to the specified person) Rs. 10,00,000
(ii) Any other person Rs. 10,00,000
The additional amount of income tax and interest thereon shall be paid and proof for such payment shall be
submitted along with the settlement application.

3. The application shall be filed in Form No 34B together with the annexure and other enclosures. Filing fees
of Rs. 500 is to be paid. Once application is made before the settlement commission, it shall not be allowed to be
withdrawn by the applicant.

4. On the date on which the settlement application is made, the assessee shall intimate the Assessing officer
in Form No. 34BA having made an application to the settlement commission.

Computation of additional amount of Income tax – Section 245C (1B), (1C) and (1D)

1. In case the applicant has not furnished a return, tax shall be computed on the income disclosed in the
application as if the total income and such tax shall be the additional amount of income tax payable.

2. In case the applicant has furnished a return, the additional amount of income tax shall be computed as
below:

Sl No. Particulars Amt

A Total income as per returns Xx
B Add: Income disclosed in settlement application Xx
C Total (A + B) Xx
D Tax on C above Xx
E Less: Tax on A above (xx)
F Additional amount of income tax (D – E) xx

Procedure on receipt of Application – Section 245D

The settlement commission has framed “The Income Tax Settlement (Procedure) Rules”. Also, section 245D lays
down the procedure to be followed in settling cases, as below:

1. Within 7 days of receipt of the application, settlement commission shall issue a notice to the applicant to
show cause as to why the settlement application be allowed to be proceeded with.

2. After giving an opportunity of hearing to the applicant, within 14 days of receipt of application, the
settlement commission shall pass an order for rejecting or admitting the settlement application.

3. If no order is passed within 14 days of receipt of the application, the settlement application is deemed to
be allowed to be proceeded with.

4. A copy of order of rejection or acceptance shall be sent to the applicant and the Principal Commissioner
of Income Tax or Commissioner of Income Tax. – Section 245D (2).

5. The settlement commission shall call for a report from the Principal Commissioner of Income Tax or
Commissioner of Income Tax within 30 days from the date on which the application was made if the application is

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allowed to be proceeded with. The Principal Commissioner of Income Tax or Commissioner of Income Tax shall
furnish the report within 30 days of receipt of communication from the settlement commission. – Sec 245D (2B).

6. Within 15 days of receipt of the report from the Principal Commissioner of Income Tax or Commissioner
of Income Tax, the settlement commission may, on the basis of the report by above mentioned authorities, and
after giving an opportunity of hearing to the applicant, declare the application as invalid by an order in writing and
shall send the same to the applicant and Principal Commissioner of Income Tax or Commissioner of Income Tax. –
Sec 245D (2C).

7. If the Principal Commissioner of Income Tax or Commissioner of Income Tax has not furnished any report
within the time limit, the settlement commission shall proceed further in the matter without such report.

8. In case the application is filed and not declared invalid, the Settlement Commission may call for the
records from the Principal Commissioner of Income Tax or Commissioner of Income Tax and after the examination
of such records, if it is of the opinion that the further enquiry or investigation is required in the matter, the
settlement commission may direct the Principal Commissioner or Commissioner to carry out such enquiry or
investigation, within 90 days from the date of receipt of communication from the settlement commission.

9. The director of Income Tax will also make enquiry and submit a confidential report to the settlement
commission.

10. After examination of the records and the report of the Principal Commissioner of Income Tax or
Commissioner of Income Tax in respect of the validity of the application or his report on further enquiry or
investigation if any, and after giving an opportunity to the applicant and to the Principal Commissioner of Income
Tax or Commissioner of Income Tax to be heard and after examining such further evidence as may be placed
before it or obtained by it, the settlement commission may pass such order as it thinks fit on the matters covered
in the application and any other matter relating to the case not covered in the application but referred in the
report of the Principal Commissioner of Income Tax or Commissioner of Income Tax. – Sec 245D(4).

11. The settlement commission shall pass such order within 18 months from the end of the month in which
the settlement application is filed. Sec 245D(4A).

12. Every such order shall provide for the terms of settlement including any demand by way of tax, penalty
and interest and manner in which any such sum shall be paid. It shall also provide that the order for settlement
shall be void if it is subsequently found by the settlement commission that the order was obtained by fraud or
misrepresentation of facts. – Sec 245D (6).

13. Within 35 days of receipt of a copy of the order, the assessee shall pay the tax payable as per the final
order. In case the additional income tax is not paid by the assessee within the prescribed time of 35 days of the
order, then interest @ 1.25% per month or part of a month is chargeable.

14. In case the settlement order is declared void, the concerned Income Tax authority shall complete the
proceedings which have been subject matter of the settlement, within 2 years from the end of the FY in which
the proceedings are declared void. – Sec 245D (7).

Rectification of Order – Section 245D (6B)

The settlement commission may rectify any mistake apparent from the record by amending any of its order within
a period of 6 months from the end of the month in which order is passed or within 6 months from the end of the
month in which application for rectification has been made by the Principal Commissioner of Income Tax or
Commissioner of Income Tax or the assessee.

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However, no application shall be made for rectification by the Principal Commissioner of Income Tax or
Commissioner of Income Tax or assessee after the expiry of the 6 months from the end of the month in which
order u/s 245D(4) is passed.

Such amendment of the order which has the effect of modifying the liability of the applicant shall not be made
unless the settlement commission has given a notice of its intension to do and an opportunity of being heard to
the applicant and the Principal Commissioner of Income Tax or Commissioner of Income Tax.

Powers of Settlement Commission

1. The Chairman of the settlement commission shall have the power to transfer any case pending before
one bench, for disposal to another bench. This power may be exercised either on application made by the
assessee or the Principal Chief Commissioner of Income Tax or Chief Commissioner of Income Tax or Principal
Commissioner of Income Tax or Commissioner of Income Tax or on his own motion. – Sec 245BC.

2. The settlement commission, during the pendency of any proceedings before it, may by order attach
provisionally any property belonging to the applicant for the purpose of protecting the interest of the revenue for
the period of 6 months extendable from time to time as it thinks fit. –Sec 245DD.

3. The settlement commission shall have all the powers which are vested in an Income Tax authority under
the act. Once an application is filed and allowed to be proceeded, the settlement commission shall have the
exclusive jurisdiction to exercise the powers and perform the functions of an Income tax authority until the final
order is passed u/s 245D (4).

4. The settlement commission has the power to regulate its own procedure and the procedure of benches
thereof in all matters arising out of the exercise of its power or of the discharge of its functions. – Sec 245F(7).

5. No person shall be entitled to inspect, or obtain copies of any reports made by any income tax authority
to any such person on application made to it in this behalf on payment of prescribed fees.

6. The settlement commission has also the power to grant immunity from prosecution and penalty if the
applicant has co-operated in the proceedings, has made full and true disclosure of his income and the manner
how the same is derived.

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